decrypt.co
Indonesia is tightening its grip on crypto trading with a tax overhaul that will hit offshore platforms with a five-fold rate increase, as the Southeast Asian nation seeks to capture revenue from its booming $39.67 billion crypto market.
Beginning August 1, new finance ministry rules will impose a 1% levy on crypto sales through foreign exchanges, up sharply from the current 0.2%, while transactions on local platforms face increases from 0.1% to 0.21%, according to Reuters.
The policy shift accompanies Indonesia's reclassification of digital assets from commodities to financial instruments under the Financial Services Authority (OJK).
This restructuring targets Indonesia's massive crypto economy as digital asset adoption explodes across the archipelago.
The country received $157.1 billion in crypto asset inflows between July 2023 and June 2024, more than any other country in the Central & Southern Asia and Oceania (CSAO) region, according to Chainalysis’ 2024 report.
The new framework eliminates value-added tax (VAT) for crypto buyers, previously ranging from 0.11-0.22%, while doubling mining levies to 2.2% from 1.1%.
Mining operations will also lose their special 0.1% income tax rate by 2026, becoming subject to standard personal or corporate taxation.
Tax hike could push crypto activity offshore
Maryna Kovalenko, director and co-founder of Brisbane-based crypto tax advisory firm Kova Tax, told Decrypt that removing buyer VAT "lowers transaction costs and simplifies new investors' experience," but warned the tax increases "could deter frequent retail traders or high-volume flows."
Even Alex Chandra, partner at Indonesia-based law firm IGNOS Law Alliance, told Decrypt that the tax hike “will raise transaction costs slightly” and “may push some activity to offshore platforms.”
He noted that local exchanges already used to tax collection “should manage the changes,” but will need to strengthen reporting systems and ensure compliance with OJK's supervisory requirements.
Chandra called the 1% tax for cross-border transactions the “most significant change,” but emphasized that its success hinges on enforcement. “It could deter Indonesian users from transacting on global platforms or prompt them to seek non-compliant alternatives,” he said.
The Ministry of Finance can appoint foreign platforms with high Indonesian traffic to collect the 1% tax; if not, the obligation shifts to the users themselves, Chandra added.
“The implementation is quite weak for cross border," he said, noting that there is "no strong reasoning" for foreign platforms to comply.
Chandra was skeptical about enforcement, saying the government might not be able to track crypto due to its “decentralized nature” as it does with bank accounts.
Indonesia and crypto taxes
Indonesia's crypto tax evolution began with treating digital assets as commodities under commodity regulator Bappebti.
The government first introduced crypto taxation on May 1, 2022, implementing dual taxation with 0.1% income tax and 0.11% VAT on domestic platforms, while unregistered exchanges faced 0.22% VAT.
However, crypto tax revenue fell 63% in 2023 despite Bitcoin's 159% surge, as transaction volumes dropped 51% and users increasingly turned to offshore platforms to avoid higher fees.